Several weeks ago, the IRS released pension plan limits for 2011, which sets the limits one can contribute to a 401(k), 403(b), and other retirement savings plans, as well as individual retirement account (IRA) limitations for traditional and Roth IRAs.
2011 401k limits
The maximum contribution limit for a 401k, 403(b), 457(b), or Government Thrift Savings Plan is remaining the same in 2011 at $16,500. If you are 50 years old or older, you can contribute an additional $5,500 in 2011.
Traditional and Roth IRA s
With a traditional IRA contributions are tax deductible and the withdrawals made from a traditional IRA during retirement are taxable. For a Roth IRA contributions are made with after tax money, and the proceeds can be withdrawn tax free after reaching age 59 1/2. Due to the ever present talk of tax rates increasing in the future, many people find the Roth IRA more attractive, particularly if they are already contributing to a tax-deferred plan such as a 401k or a 403b.
Income Phase outs based on Adjusted Gross Income (AGI) for 2011 Traditional and Roth IRAs
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
2011 Traditional and Roth IRA limits
The maximum contribution limit for a Traditional IRA or a Roth IRA is not changing for 2011 either, so the max. contribution will remain $5,000. The IRA contribution limits are supposed to be increased in increments of $500 based on inflation, and should go up regularly, but apparently inflation did not rise enough according to the government’s estimate, to reach the $500 increment. If you are 50 years old or older, you can contribute an additional $1,000 in 2011, for a total of $6,000. Note that you can contribute to both a Traditional IRA or a Roth IRA in the same year, but the total for both cannot exceed the $5,000 maximum contribution limit ($6,000 for 50 yrs old and older).
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